Why debt recovery is slow, by NDIC

The Nigerian Deposit Insurance Corporation (NDIC) has identified data integrity as one of the problems affecting its debt recovery efforts.

In a paper submitted to the House Committee on Banking and Finance, NDIC said data submitted by banks to the regulatory and advisory authorities did not fully reflect their true financial condition.

The corporation observed that returns were either inaccurate or incomplete or outright misrepresentation, adding that there were incidences of understatement of deposit liabilities and as reporting of credit exposures as off-balance sheet engagements.

It said: "As part of the measures taken by the corporation to address some of the challenges posed by data integrity, it, in collaboration with the Central Bank of Nigeria (CBN) reviewed the banks’ reporting formats several times as well as computerised the process of rendition of returns through the development of a bank analysis software, known as Bank Analysis System (BAS) in the first instance and later electronic Financial Analysis and Surveillance System (eFASS)."

On poor public awareness, it said that despite series of efforts made by the NDIC to reach out to the public, "the general public seems inadequately aware of the scheme. It is still common to find people confusing deposit insurance with the conventional insurance business.

"Public ignorance cuts across all sections of the populace including depositors, the primary beneficiary of the scheme. For the deposit insurance to be effective, it is important that the public is well and adequately informed of its benefits and limitations." It added.

NDIC said litigation is another problem affecting its operations.

"In spite of the forbearance of the regulatory authorities, suits have been brought by owners of banks against CBN/NDIC on the revocation of their banks’ licenses and appointment of liquidator. The trend if not checked, can threaten the stability of the banking system and erode confidence of the public in our banks. The damage that is associated with protracted litigation is incalculable." it said.

On recovery of debts owed failed banks, it stated: "The corporation is still faced with some constraints in its debt recovery efforts. Some of the constraints limiting against recoveries of debts include business failures, unwillingness to honour obligations and large volumes of unsecured/fraudulently granted loans.

"It is important to stress that unless debts can be expeditiously recovered, uninsured depositors and creditors cannot be paid most of their claims. This has serious consequences for public confidence in, and stability of the banking industry."